IZEA WORLDWIDE, INC. Cautionary Note Regarding Forward-Looking Information This Quarterly Report on Form 10-Q (this "Quarterly Report") contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. The statements, which are not historical facts contained in this report, including those contained in Management's Discussion and Analysis of Financial Condition and Results of Operations, and the notes to our consolidated financial statements, particularly those that utilize terminology such as "may," "will," "would," "could," "should," "expects," "anticipates," "anticipates," "estimates," "believes," "thinks," "intends," "likely," "projects," "plans," "pursue," "strategy" or "future," or the negative of these words or other words or expressions of similar meaning, are forward-looking statements. Such statements are based on currently available operating, financial and competitive information, and are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict and many of which are outside of our control. Future events and our actual results and financial condition may differ materially from those reflected in these forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause these differences include, but are not limited to, the following: •the impact of the COVID-19 pandemic on our operations, financial condition, and the worldwide economy; •customer cancellations; •our transition to a fully remote working environment; •estimates or judgements relating to our critical accounting policies; •our ability to raise additional funding needed to fund our business operation in the future; •our ability to satisfy the requirements for continued listing of our common stock on the Nasdaq Capital Market; •our ability to maintain effective disclosure controls and procedures and internal control over financial reporting; •our ability to protect our intellectual property without patents; •results of any future litigation; •competition in the industry; •variability of operating results; •market acceptance of our IZEAx, Shake and BrandGraph platforms; •variability of operating results; •our ability to maintain and enhance our brand; •accuracy of tracking the number of user accounts and our ability to detect click-fraud; •reliance on third-party social media platforms to provide the mechanism necessary to deliver influencer marketing; •our development and introduction of new products and services; •the successful integration of acquired companies, technologies, and assets into our portfolio of software and services; •marketing and other business development initiatives; •government regulation, including relating to user privacy; •economic conditions, including as a result of health and safety concerns; •the ability of our security measures to protect against cyberattacks; •the volatility of the price of our common stock; •dependence on key personnel; •the ability to attract, hire, and retain personnel who possess the technical skills and experience necessary to meet the service requirements of our customers; •the potential liability with respect to actions taken by our existing and past employees; •risks associated with international sales; and •the other risks and uncertainties described in the Risk Factors sections of this Quarterly Report and our Annual Report on Form 10-K for the year endedDecember 31, 2020 . All forward-looking statements in this document are based on our current expectations, intentions, and beliefs using information currently available to us as of the date of this Quarterly Report, and we assume no obligation to update any forward-looking statements, except as required by law. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. 25 -------------------------------------------------------------------------------- Table of Contents Company OverviewIZEA Worldwide, Inc. (together with its wholly-owned subsidiaries, "we," "us," "our," "IZEA" or the "Company") creates and operates online marketplaces that connect marketers, including brands, agencies, and publishers, with content creators such as bloggers and tweeters ("creators"). Our technology brings the marketers and creators together, enabling their transactions to be completed at scale through the management of custom content workflow, creator search and targeting, bidding, analytics, and payment processing. We help power the creator economy, allowing everyone from college students and stay-at-home individuals to celebrities and accredited journalists the opportunity to monetize their content, creativity, and influence through our marketers. These creators are compensated by IZEA for producing unique content such as long and short form text, videos, photos, status updates, and illustrations for marketers or distributing such content on behalf of marketers through their personal websites, blogs, and social media channels. Marketers engage us to gain access to our industry expertise, technology, data, analytics, and network of creators. The majority of the marketers engage us to perform these services on their behalf, but they also have the ability to use our marketplaces on a self-service basis by licensing our technology. Our technology is used for two primary purposes: the engagement of creators for influencer marketing campaigns, or the engagement of creators to create stand-alone custom content for the marketers' own use and distribution. Marketers receive influential consumer content and engaging, shareable stories that drive awareness. Our primary technology platform, The IZEA Exchange ("IZEAx"), enables transactions to be completed at scale through the management of custom content workflow, creator search and targeting, bidding, analytics, and payment processing. IZEAx is designed to provide a unified ecosystem that enables the creation and publication of multiple types of custom content through a creator's personal websites, blogs, or social media channels including Twitter, Facebook, Instagram, and YouTube, among others. In 2020, we launched two new platforms, BrandGraph and Shake. BrandGraph is a social media intelligence platform that is heavily integrated with IZEAx and both platforms rely heavily on data from each other, but it is also available as a stand-alone platform. The platform maps and classifies the complex hierarchy of corporation-to-brand relationships by category and associates social content with brands through a proprietary content analysis engine. Shake is a new online marketplace where buyers can quickly and easily hire creators of all types for influencer marketing, photography, design, and other digital services. The Shake platform is aimed at digital creatives seeking freelance "gig" work. Creators list available "Shakes" on their accounts in the platform and marketers select and purchase creative packages from them through a streamlined chat experience, assisted by ShakeBot - a proprietary, artificial intelligence assistant. Impact of COVID-19 on our Business Our operations, sales, and finances were impacted by the COVID-19 pandemic during the nine months endedSeptember 30, 2020 . In an effort to protect the health and safety of our employees, we took precautionary action and directed all staff to work from home effectiveMarch 16, 2020 and we allowed the leases for our company headquarters and temporary office spaces to expire at the end of their terms throughout 2020. We have not experienced any major declines in operating efficiency in our remote working environment and have made the decision to continue our work from home policy indefinitely as a virtual first employer. While we are able to maintain full operations remotely, the economic conditions caused by COVID-19 negatively impacted the business activity of our customers in 2020. We observed changes in advertising decisions, timing, and spending priorities from brand and agency customers, which resulted in a negative impact to our revenue in 2020. Following the third quarter of 2020, we have seen a year over year increase in Managed Services bookings, our net orders from customers, in each of the following quarters through the second quarter of 2021. That growth in bookings led to a 64% growth in overall revenue in the nine months endedSeptember 30, 2021 . While we have seen an increase in Managed Services bookings, there is still risk that bookings will not be recognized as revenue if customers cancel prior to the performance of service. We will continue to actively monitor the COVID-19 situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our future financial results. 26
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Key Components of Results of Operations Overall consolidated results of operations are evaluated based on Revenue, Cost of Revenue, Sales and Marketing expenses, General and Administrative expenses, Depreciation and Amortization, and Other Income (Expense), net.
Revenue
We generate revenue from four primary sources: (1) revenue from our managed
services when a marketer (typically a brand, agency or partner) pays us to
provide custom content, influencer marketing, amplification, or other campaign
management services ("Managed Services"); (2) revenue from fees charged to
software customers on their marketplace spend within our IZEAx and Shake
platforms ("Marketplace Spend Fees"); (3) revenue from license and subscription
fees charged to access the IZEAx and BrandGraph platforms ("License Fees"); and
(4) revenue derived from other fees such as inactivity fees, early cash-out
fees, and other miscellaneous fees charged to users of our platforms ("Other
Fees").
As discussed in more detail within "Critical Accounting Policies and Use of
Estimates" under "Note 1. Company and Summary of Significant Accounting
Policies," under Part I, Item 1 herein, revenue from Marketplace Spend Fees is
reported on a net basis and revenue from all other sources, including Managed
Services, License Fees, and Other Fees are reported on a gross basis. We further
categorize these sources into two primary groups: (1) Managed Services and (2)
SaaS Services, which includes revenue from Marketplace Spend Fees, License Fees,
and Other Fees.
Cost of Revenue
Our cost of revenue consists of direct costs paid to our third-party creators
who provide the custom content, influencer marketing or amplification services
for our Managed Service customers where we report revenue on a gross basis. It
also includes internal costs related to our campaign fulfillment and SaaS
support departments. These costs include salaries, bonuses, commissions,
stock-based compensation, employee benefit costs, and miscellaneous departmental
costs related to the personnel who are primarily responsible for providing
support to our customers and ultimately fulfillment of our obligations under our
contracts with customers. Where appropriate, we capitalize costs that were
incurred with software that is developed or acquired for our revenue supporting
platforms and amortize these costs over the estimated useful lives of those
platforms. This amortization is separately stated under depreciation and
amortization in our consolidated statements of operations and comprehensive
loss.
Sales and Marketing
Our sales and marketing expenses consist primarily of salaries, bonuses,
commissions, stock-based compensation, employee benefit costs, travel, and
miscellaneous departmental costs for our marketing, sales, and sales support
personnel, as well as marketing expenses such as brand marketing, public
relation events, trade shows and marketing materials, and travel expenses.
General and Administrative
Our general and administrative expense consists primarily of salaries, bonuses,
commissions, stock-based compensation, employee benefit costs, and miscellaneous
departmental costs related to our executive, finance, legal, human resources,
and other administrative personnel. It also includes travel, public company and
investor relations expenses, as well as accounting and legal professional
services fees, leasehold facilities, and other corporate-related expenses.
General and administrative expense also includes our technology and development
costs consisting primarily of our payroll costs for our internal engineers and
contractors responsible for developing, maintaining, and improving our
technology, as well as hosting and software subscription costs. These costs are
expensed as incurred, except to the extent that they are associated with
internal use software that qualifies for capitalization, which are then recorded
as software development costs in the consolidated balance sheet. We also
capitalize costs that are related to our acquired intangible assets.
Depreciation and amortization related to these costs are separately stated under
depreciation and amortization in our consolidated statements of operations and
comprehensive loss. General and administrative expense also includes current
period gains and losses on our acquisition costs payable, as well as gains and
losses from the sale of fixed assets. Impairments on fixed assets, intangible
assets, and goodwill, are included as part of general and administrative expense
when they are not material and broken out separately in our consolidated
statements of operations and comprehensive loss when they are material.
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Depreciation and Amortization
Depreciation and amortization expense consists primarily of amortization of our
internal use software and acquired intangible assets from our business
acquisitions. To a lesser extent, we also have depreciation and amortization on
equipment and leasehold improvements used by our personnel. Costs are amortized
or depreciated over the estimated useful lives of the associated assets.
Other Income (Expense)
Interest Expense. Interest expense is mainly related to the imputed interest on
our acquisition costs payable and interest when we use our secured credit
facility.
Other Income (Expense). Other income (expense) consists primarily of interest
income for interest earned or changes in the value of our foreign assets and
liabilities and foreign currency exchange gains and losses on foreign currency
transactions, primarily related to the Canadian Dollar. For 2021, it also
includes gain on the forgiveness of debt.
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Results of Operations for the Three Months Ended
The following table sets forth a summary of our consolidated statements of operations and comprehensive loss and the change between the periods:
Three Months Ended September 30,
2021 2020 $ Change % Change
Revenue $ 7,607,546 $ 4,036,120 $ 3,571,426 88 %
Costs and expenses:
Cost of revenue (exclusive of amortization) 3,975,532 1,701,770 2,273,762 134 %
Sales and marketing 2,240,936 1,403,037 837,899 60 %
General and administrative 2,670,785 1,827,267 843,518 46 %
Depreciation and amortization 220,453 372,483 (152,030) (41) %
Total costs and expenses 9,107,706 5,304,557 3,803,149 72 %
Loss from operations (1,500,160) (1,268,437) (231,723) 18 %
Other income (expense):
Interest expense (1,558) (16,448) 14,890 (91) %
Other income, net 20,961 30,085 (9,124) (30) %
Total other income (expense), net 19,403 13,637 5,766 42 %
Net loss $ (1,480,757) $ (1,254,800) $ (225,957) 18 %
RevenueThe following table illustrates our revenue by type, the percentage of total revenue by type, and the change between the periods:
Three Months Ended September 30,
2021 2020 $ Change % Change
Managed Services Revenue 7,153,517 94 % 3,513,806 87 % $ 3,639,711 104 %
Marketplace Spend Fees 89,196 1 % 120,630 3 % (31,434) (26) %
License Fees 354,850 5 % 396,549 10 % (41,699) (11) %
Other Fees 9,983 - % 5,135 - % 4,848 94 %
SaaS Services Revenue 454,029 6 % 522,314 13 % (68,285) (13) %
Total Revenue $ 7,607,546 100 % $ 4,036,120 100 % $ 3,571,426 88 %
Historically, we have invested the majority of our time and resources in our
Managed Services business, which provides the majority of our revenue. Our
acquisitions of Ebyline and ZenContent allowed us to expand our product
offerings to provide custom content and generate Marketplace Spend Fees in
addition to and in combination with our influencer marketing campaigns to expand
our Managed Services. Our July 2018 merger with TapInfluence expanded our SaaS
Services to derive revenue from Marketplace Spend Fees and License Fees.
Managed Services is generated when a marketer (typically a brand, agency or
partner) pays us to provide custom content, influencer marketing, amplification,
or other campaign management services. Managed Services revenue during the three
months ended September 30, 2021 , increased by $3.6 million or 104% to $7.2
million compared to $3.5 million for the same period in 2020, primarily due to
increased orders from new and existing customers returning to and expanding
their marketing efforts through sponsored social marketing as compared to the
prior year period when customers were limiting marketing efforts in light of the
COVID-19 uncertainties.
SaaS Services revenue is generated by the self-service use of our technology
platforms by marketers to manage their own content workflow and influencer
marketing campaigns. It consists of fees earned on the marketer's spend within
the IZEAx, BrandGraph, and Shake platforms, along with the license and support
fees to access the platform services.
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•Marketplace Spend Fees decreased by $31,434 to $89,196 for the three months
ended September 30, 2021 compared to $120,630 for the same period in 2020,
primarily as a result lower spend levels from our marketers and lower average
fees assessed on those spends as a result of competitive pricing efforts in
IZEAx. Revenue from Marketplace Spend Fees represents our net margins received
on this business.
•License Fees revenue decreased during the three months ended September 30, 2021
to $354,850 compared to $396,549 in the same period of 2020. The decrease in
IZEAx license fees was offset by an increase in subscriptions for BrandGraph and
IZEAx Discovery services. Prior to 2021, the subscription fees for BrandGraph
and IZEAx Discovery were classified under Other Fees, but these amounts from
2020 have been reclassified under License Fees to conform with their 2021
classification.
•Other Fees revenue increased by $4,848 , or approximately 94%, for the three
months ended September 30, 2021 compared to the same period in 2020 due to an
increase in plan fees assessed on user accounts.
Cost of Revenue
Cost of revenue for the three months ended September 30, 2021 increased by
$2,273,762 , or approximately 134%, compared to the same period in 2020 primarily
as a result of the increase in Managed Services revenue. Cost of revenue as a
percentage of revenue increased from 42% in 2020 to 52% in 2021 primarily due to
a higher volume of larger customer contracts which generally carry higher
overall delivery costs.
Sales and Marketing
Sales and marketing expense for the three months ended September 30, 2021
increased by $837,899 , or approximately 60%, compared to the same period in
2020. Advertising and marketing expenses increased $360,000 to further promote
brand awareness and improve customer acquisition, satisfaction, and retention.
Our payroll and personnel related expenses and stock compensation for sales and
marketing personnel increased $368,000 as a result of increased commission and
bonus expense due to the increase in customer bookings in the third quarter of
2021. Additionally, we began outsourcing certain sales support functions and
adding new software solutions to assist personnel in 2021 resulting in an
increase of $25,000 for contractors and $44,000 for software subscriptions.
General and Administrative
General and administrative expense for the three months ended September 30, 2021
increased by $843,518 , or approximately 46%, compared to the same period in
2020. General and administrative expense for the three months ended
September 30, 2021 increased due to a $685,000 increase in payroll, personnel
related expenses, and stock compensation primarily as a result of an increase in
annual salaries, and higher bonus and stock compensation expense due to the
improved company performance in the third quarter of 2021. Contractor expenses
increased $281,000 as we are increasing the number of internal and external
engineers working on our technology offerings. These increases were partially
offset by decreases in (i) rent expense of $39,000 due to the non-renewal of
expiring office facility leases and (ii) non-renewal of investor relations
contracts with a savings of $16,000 .
Depreciation and Amortization
Depreciation and amortization expense for the three months ended September 30,
2021 decreased by $152,030 , or approximately 41%, compared to the same period in
2020.
Depreciation and amortization expense on property and equipment was $33,201 and
$34,578 for the three months ended September 30, 2021 and 2020, respectively.
Depreciation expense has decreased slightly due to the disposal of aging
computer equipment in recent quarters.
Amortization expense was $187,381 and $340,195 for the three months ended
September 30, 2021 and 2020, respectively. Amortization expense related to
intangible assets acquired in acquisitions was $72,222 and $237,657 for the
three months ended September 30, 2021 and 2020, respectively, while amortization
expense related to internal use software development costs was $115,159 and
$102,538 for the three months ended September 30, 2021 and 2020, respectively.
Amortization on our intangible acquisition assets is decreasing due to
completion of amortization on certain intangible assets acquired in prior years
while amortization on our internal software costs is increasing due to continued
development and the release of BrandGraph and Shake in 2020.
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Other Income (Expense)
Interest expense decreased by $14,890 to $1,558 during the three months ended
September 30, 2021 compared to the same period in 2020 due primarily to the
elimination of amounts owed on our acquisition costs payable and amortization
thereon after July 2019 .
The $9,124 increase in other income during the three months ended September 30,
2021 when compared to the same period in 2020 resulted primarily from higher
levels of short term investments.
Net Loss
Net loss for the three months ended September 30, 2021 was $1,480,757 , a
$225,957 increase compared to the net loss of $1,254,800 for the same period in
2020. The increase in net loss was a result of the changes discussed above.
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Results of Operations for the Nine Months Ended
Nine Months Ended September 30,
2021 2020 $ Change % Change
Revenue $ 19,521,917 $ 11,934,827 $ 7,587,090 64 %
Costs and expenses:
Cost of revenue (exclusive of amortization) 9,664,543 5,256,536 4,408,007 84 %
Sales and marketing 6,622,128 4,154,871 2,467,257 59 %
General and administrative 7,865,510 6,165,597 1,699,913 28 %
Impairment of goodwill - 4,300,000 (4,300,000) (100) %
Depreciation and amortization 949,906 1,250,859 (300,953) (24) %
Total costs and expenses 25,102,087 21,127,863 3,974,224 19 %
Loss from operations (5,580,170) (9,193,036) 3,612,866 (39) %
Other income (expense):
Interest expense (24,090) (42,542) 18,452 (43) %
Other income (expense), net 2,019,379 26,175 1,993,204 7,615 %
Total other income (expense), net 1,995,289 (16,367) 2,011,656 (12,291) %
Net loss $ (3,584,881) $ (9,209,403) $ 5,624,522 (61) %
RevenueThe following table illustrates our revenue by type, the percentage of total revenue by type, and the change between the periods:
Nine Months Ended September 30,
2021 2020 $ Change % Change
Managed Services Revenue $ 18,139,370 93 % $ 10,129,210 85 % $ 8,010,160 79 %
Marketplace Spend Fees 269,160 1 % 482,817 4 % (213,657) (44) %
License Fees 1,082,734 6 % 1,291,002 11 % (208,268) (16) %
Other Fees 30,653 - % 31,798 - % (1,145) (4) %
SaaS Services Revenue 1,382,547 7 % 1,805,617 15 % (423,070) (23) %
Total Revenue $ 19,521,917 100 % $ 11,934,827 100 % $ 7,587,090 64 %
Managed Services revenue during the nine months ended September 30, 2021
increased by $8.0 million or 79% to $18.1 million compared to $10.1 million the
same period in 2020, primarily due to increased orders from new and existing
customers returning to and expanding their marketing efforts through sponsored
social marketing as compared to the prior year period when customers curtailed
marketing efforts in light of the COVID-19 uncertainties.
SaaS Services revenue during the nine months ended September 30, 2021 decreased
23% from the same period in 2020, as follows:
•Marketplace Spend Fees decreased by $213,657 for the nine months ended
September 30, 2021 when compared with the same period in 2020, primarily as a
result of lower spend levels from our marketers and lower average fees assessed
on those spends as a result of competitive pricing efforts in IZEAx. Revenue
from Marketplace Spend Fees represents the net margins on this business.
•License Fees revenue decreased during the nine months ended September 30, 2021
to $1,082,734 compared to $1,291,002 in the same period of 2020. The decrease
was a result of the implementation of a competitive standardized pricing system
for all new and renewing IZEAx license fee customers in 2020 that was at a lower
price point than the former licensing contracts put in place prior to 2020. The
decrease in IZEAx license fees was
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offset by an increase in subscriptions for BrandGraph and IZEAx Discovery
services. Prior to 2021, the subscription fees for BrandGraph and IZEAx
Discovery were classified under Other Fees, but these amounts from 2020 have
been reclassified under License Fees to conform with their 2021 classification.
•Other Fees revenue decreased $1,145 for the nine months ended September 30,
2021 compared to the same period in 2020 due to a decrease in the amount of
inactivity fees assessed on user accounts.
Cost of Revenue
Cost of revenue for the nine months ended September 30, 2021 increased by
$4,408,007 , or approximately 84%, compared to the same period in 2020 primarily
as a result of the increase in Managed Services revenue. Cost of revenue as a
percentage of revenue increased from 44% in 2020 to 50% in 2021 primarily due to
a higher volume of larger customer contracts which generally carry higher
overall delivery costs.
Sales and Marketing
Sales and marketing expense for the nine months ended September 30, 2021
increased by $2,467,257 , or approximately 59%, compared to the same period in
2020. Advertising and marketing expenses increased $1,146,000 as a result of
increased spend to increase brand awareness and improve customer acquisition,
satisfaction, and retention. Our payroll and personnel related expenses and
stock compensation for sales and marketing personnel increased $1,075,000 as a
result of increased commission and bonus expense due to the increase in customer
bookings year to date of 2021. Additionally, we began outsourcing certain sales
support functions and adding new software solutions to assist personnel in 2021
resulting in an increase of $136,000 for contractors and $77,000 for software
subscriptions.
General and Administrative
General and administrative expense for the nine months ended September 30, 2021
increased by $1,699,913 , or approximately 28%, compared to the same period in
2020. General and administrative expense for the nine months ended September 30,
2021 increased due to a $1,276,000 increase in payroll and personnel related
expenses primarily as a result of an increase in annual salaries, and higher
bonus and stock compensation expense due to the improved company performance in
the first two quarters of 2021. Contractor expenses increased $782,000 as we are
increasing the number of internal and external engineers working on our
technology offerings. These increases were partially offset by decreases in (i)
rent expense of $255,000 due to the non-renewal of expiring office facility
leases, (ii) non-renewal of investor relations contracts with a savings of
$61,000 , and (iii) reduced bad debt expense of $108,000 in 2021 after the
outbreak of COVID-19 caused an increase in 2020.
Impairment of Goodwill
In March 2020 , we identified triggering events due to the reduction in our
projected revenue due to adverse economic conditions caused by the COVID-19
pandemic, the continuation of a market capitalization below our carrying value,
and uncertainty for recovery given the volatility of the capital markets
surrounding COVID-19. We performed an interim assessment of goodwill, using the
discounted cash flow method under the income approach and the guideline
transaction method under the market approach, and determined that the carrying
value of our Company's reporting unit as of March 31, 2020 exceeded the fair
value. As a result of the valuation, we recorded a $4.3 million impairment of
goodwill resulting in an expense for the nine months ended September 30, 2020 .
Depreciation and Amortization
Depreciation and amortization expense for the nine months ended September 30,
2021 decreased by $300,953 , or approximately 24%, compared to the same period in
2020.
Depreciation and amortization expense on property and equipment was $98,759 and
$102,495 for the nine months ended September 30, 2021 and 2020, respectively.
Depreciation expense has decreased slightly due to the disposal of aging
computer equipment as well as furniture and fixtures in recent periods.
Amortization expense was $851,147 and $1,148,364 for the nine months ended
September 30, 2021 and 2020, respectively. Amortization expense related to
intangible assets acquired in acquisitions was $505,556 and $842,637 for the
nine months ended September 30, 2021 and 2020, respectively, while amortization
expense related to internal use software development costs was $345,591 and
$305,727 for the nine months ended September 30, 2021 and 2020, respectively.
Amortization on our intangible acquisition assets decreased due to completion of
amortization on certain intangible assets
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Other Income (Expense) Interest expense decreased by$18,452 to$24,090 during the nine months endedSeptember 30, 2021 compared to the same period in 2020 due primarily to a reduction in our financing arrangements, including the line of credit withWestern Alliance Bank , the PPP Loan, and finance charges on insurance premiums. The increase in other income during the nine months endedSeptember 30, 2021 when compared to the same period in 2020 resulted primarily from the gain on the forgiveness of debt totaling$1,927,220 on the PPP Loan, including the principal amount of$1,905,100 and accrued interest of$22,120 . Net Loss Net loss for the nine months endedSeptember 30, 2021 was$3,584,881 , a$5,624,522 decrease in the net loss of$9,209,403 for the same period in 2020. The decrease in net loss was primarily the result of the impairment of goodwill recognized in 2020 as well as the debt forgiveness of the PPP Loan in 2021. Key Metrics We review information provided by our key financial metrics, Managed Services Bookings, and gross billings, to assess the progress of our business and make decisions on where to allocate our resources. As our business evolves, we may make changes to the key financial metrics that we use to measure our business in future periods. Managed Services Bookings Managed Services Bookings is a measure of all sales orders received during a time period less any cancellations received, or refunds given during the same time period. Sales order contracts vary in complexity with each customer and range from custom content delivery to integrated marketing services; our contracts generally run from several months for smaller contracts up to twelve months for larger contracts. We recognize revenue from our Managed Services contracts based on a percentage of completion basis as we deliver the content or services over time, which can vary greatly. Historically, bookings have converted to revenues over a 6-month period on average. However, since late 2020, we have been receiving increasingly larger and more complex sales orders which, in turn, has lengthened the average revenue period to approximately 9-months, with the largest contracts taking longer to complete. For this reason, Managed Services Bookings, while an overall indicator of the health of our business, may not be used to predict quarterly revenues, and could be subject to future adjustment. Managed Services Bookings is useful information as it reflects the amount of orders received in one period, even though revenue from those orders may be reflected over varying amounts of time. Management uses the Managed Services Bookings metric to plan its operating staff, to identify key customer group trends to enlighten go-to-market activities, and to inform its product development efforts. The following tables set forth our Managed Services Bookings and the change between the periods: Three Months Ended September 30, 2021 2020 $ Change % Change Managed Services Bookings$ 11,290,569 $ 4,022,528 $ 7,268,041 181 % Nine Months Ended September 30, 2021 2020 $ Change % Change Managed Services Bookings$ 28,838,629 $
10,698,329$ 18,140,300 170 % 34
-------------------------------------------------------------------------------- Table of Contents Gross Billings by Revenue Type Company management evaluates our operations and makes strategic decisions based, in part, on our key metric of gross billings from our two primary types of revenue, Managed Services and SaaS Services. We define gross billings as the total dollar value of the amounts earned from our customers for the services we perform or the amounts billed to our SaaS customers for their self-service purchase of goods and services on our platforms. The amounts billed to our SaaS customers are on a cost-plus basis. Gross billings are the amounts of our reported revenue plus the cost of payments we made to third-party creators providing the content or sponsorship services, which are netted against revenue for generally accepted accounting principles inthe United States ("GAAP") reporting purposes. Managed Services Gross Billings include the total dollar value of the amounts billed to our customers for the services we perform. Gross billings for Managed Services are the same as Managed Services Revenue reported for those services in our consolidated statements of operations and comprehensive loss in accordance with GAAP. SaaS Service Gross Billings include the license and other fees together with the total amounts billed to our SaaS customers for their self-service purchase of goods and services on our platforms, termed 'Marketplace Spend Fees.' Our SaaS customers' marketplace spend is billed on a cost-plus basis. SaaS Services Revenue includes the total of License and Other Fees gross billings, plus the Marketplace Spend Fees gross billings netted by our third-party creator costs on those billings in accordance with GAAP. We consider gross billings to be an important indicator of our potential performance as it measures the total dollar volume of transactions generated through our marketplaces. Tracking gross billings allows us to monitor the percentage of gross billings that we are able to retain after payments to our creators. Additionally, tracking gross billings is critical as it pertains to our credit risk and cash flows. We invoice our customers based on total services performed or based on their self-service transactions plus our fee. Then we remit the agreed-upon transaction price to the creators. If we do not collect the money from our customers prior to the time of payment to our creators, we could experience large swings in our cash flows. Additionally, we incur the credit risk to collect amounts owed from our customers for all services performed by us or by the creators. Finally, gross billings allow us to evaluate our transaction totals on an equal basis in order for us to see our contribution margins by revenue stream so that we can better understand where we should be allocating our resources. The following tables set forth our gross billings by revenue type, the percentage of total gross billings by type, and the change between the periods: Three Months Ended September 30, QTD QTD 2021 2020 $ Change % Change Managed Services Gross Billings$ 7,153,517 83 %$ 3,513,806 64 %$ 3,639,711 104 % Marketplace Spend Fees 1,105,516 13 % 1,605,729 29 % (500,213) (31) % License Fees 354,850 4 % 396,549 7 % (41,699) (11) % Other Fees 9,983 - % 5,135 - % 4,848 94 % SaaS Services Gross Billings 1,470,349 17 % 2,007,413 36 % (537,064) (27) % Total Gross Billings$ 8,623,866 100 %$ 5,521,219 100 %$ 3,102,647 56 % Nine Months Ended September 30, YTD YTD 2021 2020 $ Change % Change Managed Services Gross Billings$ 18,139,370 80%$ 10,129,210 63%$ 8,010,160 79% Marketplace Spend Fees 3,295,451 15% 4,702,383 29% (1,406,932) (30)% License Fees 1,082,734 5% 1,291,002 8% (208,268) (16)% Other Fees 30,653 -% 31,798 -% (1,145) (4)% SaaS Services Gross Billings 4,408,838 20% 6,025,183 37% (1,616,345) (27)% Total Gross Billings$ 22,548,208 100%$ 16,154,393 100%$ 6,393,815 40% 35
-------------------------------------------------------------------------------- Table of Contents Non-GAAP Financial Measure Adjusted EBITDA Adjusted EBITDA is a "non-GAAP financial measure" under the rules of theSecurities and Exchange Commission (the "SEC"). We define Adjusted EBITDA as earnings or loss before interest, taxes, depreciation and amortization, non-cash stock-based compensation, gain or loss on asset disposals or impairment, and certain other unusual or non-cash income and expense items such as gains or losses on settlement of liabilities and exchanges, and changes in the fair value of derivatives, if applicable.
We use Adjusted EBITDA as a measure of operating performance, for planning purposes, to allocate resources to enhance the financial performance of our business, and in communications with our Board of Directors regarding our financial performance. We believe that Adjusted EBITDA also provides useful information to investors as it primarily excludes non-cash transactions, and it provides consistency to facilitate period-to-period comparisons.
All companies do not calculate Adjusted EBITDA in the same manner, and Adjusted EBITDA as presented by us may not be comparable to Adjusted EBITDA presented by other companies, which limits its usefulness as a comparative measure. Moreover, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for an analysis of our results of operations as under GAAP. These limitations are described further in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . The following table sets forth a reconciliation from the GAAP measurement of net loss to our non-GAAP financial measure of Adjusted EBITDA for the three and nine months endedSeptember 30, 2021 and 2020: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net loss$ (1,480,757) $
(1,254,800)
- - (1,927,220) -
Non-cash stock-based compensation 229,039 108,568 633,219 356,846
Non-cash stock issued for payment of
services 37,544 31,250 109,784 93,749
Interest expense 1,558 16,448 24,090 42,542
Depreciation and amortization 220,453 372,483 949,906 1,250,859
Impairment of goodwill - - - 4,300,000
Other non-cash items (13,732) 1,283 (21,522) (22,423)
Adjusted EBITDA $ (1,005,895) $ (724,768) $ (3,816,624) $ (3,187,830)
Revenue $ 7,607,546 $ 4,036,120 $ 19,521,917 $ 11,934,827
Adjusted EBITDA as a % of Revenue (13) % (18) % (20) % (27) %
Liquidity and Capital Resources
We had cash and cash equivalents of $74,451,857 as of September 30, 2021 as
compared to $33,045,225 as of December 31, 2020 , an increase of $41,406,632 ,
primarily due to net proceeds received from the sale of our common stock, partly
offset by operating losses. We have incurred significant net losses and negative
cash flow from operations for most periods since our inception in 2006, which
has resulted in a total accumulated deficit of $74,219,657 as of September 30,
2021 . To date, we have financed our operations through revenue from operations,
the sale of our equity securities, and proceeds from the PPP Loan.
Cash used for operating activities was $3,652,080 during the nine months ended
September 30, 2021 and is primarily the result of operating losses during the
period. Net cash used for investing activities was $4,088 during the nine months
ended September 30, 2021 due to purchases and sales of our fixed assets. Net
cash provided by financing activities during the nine months ended September 30,
2021 was $45,062,800 , which consisted primarily of net proceeds of approximately
$45.5 million from the sale of our common stock.
36--------------------------------------------------------------------------------
Table of Contents At the Market (ATM) Offering OnJune 4, 2020 andJanuary 25, 2021 , we entered into ATM Sales Agreements withNational Securities Corporation , as sales agent ("National Securities "), pursuant to which we could offer and sell shares of our common stock through National Securities, by any method deemed to be an "at the market offering" as defined in Rule 415 under the Securities Act of 1933, as amended, for aggregate purchase prices of up to$40 million and$35 million , respectively (the "ATM Offerings"). During the nine months endedSeptember 30, 2021 , we sold 11,186,084 shares at an average price of$4.16 per share for total gross proceeds of$46,544,688 . FromJune 4, 2020 throughApril 15, 2021 , we sold a total of 26,005,824 shares at an average price of$2.88 per share for total gross proceeds of$74,999,784 in the ATM Offerings under our shelf registration statement on Form S-3 (File No. 333-238619). TheJune 2020 andJanuary 2021 Sales Agreements were each terminated following the sale of all shares of common stock available to be sold thereunder. OnJune 21, 2021 , we entered into a third ATM Sales Agreement with National Securities Corporation, as sales agent, pursuant to which we could offer and sell shares of our common stock, from time to time, through National Securities, for aggregate purchase prices up to$100 million by any method deemed to be an ATM Offering under our shelf registration statement on Form S-3 (File No. 333-256078). No sales have been made under this agreement as ofSeptember 30, 2021 . PPP Loan OnApril 23, 2020 , we received a PPP Loan in the principal amount of$1,905,100 . OnJune 18, 2021 , we were notified by the Lender that the loan had been forgiven by the SBA in full, including accrued interest. The principal amount of$1,905,100 and accrued interest of$22,120 was recorded as a gain on forgiveness of debt in other income (expense) in our consolidated statements of operations and comprehensive loss inJune 2021 . Financial Condition We have seen impacts on our operations due to changes in advertising decisions, timing, and spending priorities from our customers as a result of COVID-19, which has had and may continue to have a negative impact to our expected future sales and valuation estimates. With our cash on hand as ofSeptember 30, 2021 , we expect to have sufficient cash reserves and financing sources available to cover expenses at least one year from the issuance of this Quarterly Report based on our current estimates of revenue and expenses for the next twelve months. While the disruption caused by COVID-19 is currently expected to be temporary, it is generally outside of our control and there is uncertainty around the duration and the total economic impact. Therefore, this matter could have a further material adverse impact on our business, results of operations, and financial position in future periods. Off-Balance Sheet Arrangements We did not engage in any activities involving variable interest entities or "off-balance sheet arrangements" (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) as ofSeptember 30, 2021 . Critical Accounting Policies and Use of Estimates There have been no material changes to our critical accounting policies as set forth in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . For a summary of our significant accounting policies, please refer to Note 1 - Company and Summary of Significant Accounting Policies included in Item 1 of this Quarterly Report. Recent Accounting Pronouncements See "Note 1. Company and Summary of Significant Accounting Policies," under Part I, Item 1 of this Quarterly Report for information on additional recent pronouncements.
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